Selling Dental Practice : A Complete Guide

If you’re a practice owner looking to sell your dental practice, you want to do it quickly and efficiently. The dental industry is highly competitive, and when it comes to navigating your way to the right deal and maximizing your outcomes, you should look at these five metrics and how they each play a role in helping drive your practice’s actual value.

Best Time to Sell Your Dental Practice

One dental practice sold quickly and at a favorable price, while another similar practice sat on the market for months with little interest. 

To prevent this from happening, you must clearly understand the most critical factors driving a dental practice’s value.

Why is this so important?

Getting the correct information about these factors will help you determine what makes your practice unique, which can help you negotiate the sale from a position of strength. Additionally, by having a good understanding of the critical metrics, dental practitioners can identify areas of improvement that can increase the value of their practice before the sale.

Keep this in mind: 

You need more than knowing what you want to get out of your practice. You also need to know what potential buyers want and how they will value your practice based on those wants and needs.

Because if you don’t, a buyer may be able to convince you that you’re getting a fantastic deal by offering less than your practice’s worth. 

One more thing:

Some metrics hold more weight than others when determining the value of a dental practice.

Without delay, we present to you the top 5 key metrics essential to evaluate when looking to sell your dental practice. It’s worth noting that these metrics are relevant for any dental practice out there.

Top 5 Factors To Consider When Selling Your Dental Practice

Patient Base

The patient base is the foundation upon which the value of your practice stands. 

When potential buyers evaluate your practice, they want to know who your patients are and how loyal they are to your practice. They want to know that when they purchase your practice, they’re buying a stable, thriving business with a strong foundation.

Let’s put it into perspective:

According to numerous market research, the cost of acquiring new customers is higher than what’s needed to keep old customers returning for your services.

It is not surprising, then, that a practice boasting a large and loyal patient base is considered highly valuable. 

Such a patient base guarantees a steady revenue stream and reduces the risk for potential buyers, as it is a clear indication of a practice’s ability to thrive in the long term.

Patient retention rate is another crucial metric to consider when evaluating the patient base of a dental clinic. 

Here’s why:

A practice with a high patient retention rate is seen as more valuable, as it suggests a good reputation and a positive patient experience. These are coveted goodwill buyers to look out for – hence, practices with high retention rates are considered more valuable.

That’s not all:

Evaluating the demographics of the patient base is also essential. Knowing the age, gender, and location of your patients can provide valuable insights into the target market and potential growth opportunities. For example, a practice with many young families suggests a higher potential for long-term growth.

Financials

The financials are the pulse of the operation. Understanding revenue, expenses, and profit paints a clear picture of the practice’s financial health and can make or break the value of the dental care clinic.

3 points to note:

• Revenue is the lifeblood of any business, and a practice with high gross revenue is more attractive to potential buyers. It suggests a strong financial position and potential for growth. 
• A practice with low expenses suggests a well-run business with efficient operations. It also indicates that the practice is not overextending itself financially, which is an attractive quality to potential buyers.
• Profitability shows a practice’s ability to generate income and maintain a healthy bottom line. A profitable dental office is more valuable, as it indicates a good return on investment for potential buyers.

A practice with high revenue, low expenses, and profitability is considered more valuable than a practice with low revenue, high expenses, and no profitability. The former suggests a well-run, stable and profitable business, while the latter implies a struggling one. 

It is important to note that even though a practice may have high revenue, it could also have high expenses and low profitability, which would negatively impact the practice’s value. Therefore, dental practice sellers should consider all of these factors together to get a complete picture of a practice’s financial situation.

Staff

As every business owner knows, the staff are the backbone of the practice, and their skills and experience can significantly impact the value of the business.

A practice with highly skilled and experienced staff is seen as more valuable, as it suggests a strong team that can provide high-quality care to patients. 

Secondly, a practice with highly skilled and experienced staff is more likely to be able to adapt to new technologies and methods, which can help the practice maintain its competitiveness in the market.

To drive home the point: 

Think of a dental practice as a well-oiled machine. The staff is the engine that keeps the machine running smoothly. The highly skilled and experienced team is like a powerful engine that can run at high speeds and handle heavy loads. On the other hand, poorly trained and inexperienced staff are like a weak engine that will struggle to keep the machine running.

Location

Location plays a significant role in the practice’s accessibility, visibility, and demographics. 

Let us explain:

Suppose your practice is in a prime location with high visibility and accessibility. In that case, it will be more valuable than one in an inconvenient or less visible area. 

Why?

A dental care facility in a prime location is like a storefront on a busy street; it’s easily accessible and visible to potential patients – which potentially means more foot traffic and subsequent paying business. Also, it can positively impact patient satisfaction and retention rates.

Which is, ultimately, a big attraction for potential buyers.

There’s more:

Here are a two other reasons why location matters when it comes to valuing a dental practice:

Demographics: A practice located in an area with a large population of a seemingly well-to-do young populace, for example, suggests a higher potential for long-term growth.

Competition: In other words, the number and proximity of other dental practices in the area. A dental practice in an area with few other dental practices will be more valuable than one in an area with a high number of practices. Look at it this way: a practice in an area with low competition is like a small shop in a small town; it’s the only option for customers.

Equipment

Without mincing words, a dental practice with newer and well-maintained equipment is more valuable, as it suggests a well-run business with up-to-date technology. 

Here’s a simple analogy:

Think of it like a brand-new sports car, shiny and sleek. It will make potential buyers drool.

So…

Consider these key points when evaluating the equipment of your dental practice:

Age of the equipment: Newer equipment is more valuable as it suggests up-to-date technology and less likelihood of breakdowns.

The condition of the equipment: Well-maintained equipment is more valuable as it suggests a well-run business that has taken care of its equipment. Think of it like a clunky old jalopy; it will not impress anyone.

Brand of the equipment: Renowned brands are more valuable as they suggest quality and durability.

Equipment type: The more advanced the equipment, the more valuable the practice.

With these in mind, if you are considering selling your dental care clinic, we recommend that you:

• Assess the age and condition of all equipment in the practice. Make a list of any equipment that is outdated or in need of repairs.
• Schedule regular maintenance and repairs for all equipment to ensure it is in good working condition.
• Research and invest in new and advanced technology equipment to update the practice and increase its value. However, stay within the financial capabilities of the practice.
• Prioritize equipment from well-known and reputable brands to ensure quality and durability.
• Keep detailed records of all equipment purchases, maintenance, and repairs to provide transparency and proof of well-maintained equipment to potential buyers.

Best way to sell a dental practice

Selling your dental practice is a lot like selling a house.

You need to figure out how to present it in the best possible light so it looks attractive to potential buyers. And you need to know what improvements will make the most difference—and then make those improvements before you put your oral care facility on the market.

In this post, we’ve discussed five key factors to consider when planning the sale of a dental practice, including patient base, financials, staff, and equipment. But it’s not just about understanding these factors alone. It’s about understanding how they all come together to create a complete picture of the practice’s value. It’s about seeing the bigger picture and not just the individual pieces.

And that’s why…

We’re Here To Help

You’re probably doing it all by yourself right now. But that’s not the best way to sell a dental practice because the entire process can be daunting, even stressful. 

With decades of experience between us, our team of experts can provide guidance and support throughout the entire process. We can help you identify areas of improvement, prepare your practice for sale, and ensure that you receive the best possible price for your practice.

We encourage you to reach out to us for a no-strings-attached consultation to walk through the entire process and ensure you understand what is involved.

Don’t wait. Take the first step towards selling your dental practice for top dollar today. Contact us, and explore how we can help you with your exit strategy